Dan Walters

Dan Walters

By Dan Walters
Published: Sunday, May. 12, 2013 – 12:00 am | Page 3A
Last Modified: Sunday, May. 12, 2013 – 7:33 am

There’s absolutely nothing wrong, per se, with incurring debt, whether it’s by families, businesses or governments. A functional credit market is absolutely vital to a modern economy.

“Functional,” however, means not taking on debt beyond a reasonable capacity to repay. We just experienced a wrenching example of dysfunctional borrowing.

Mortgage bankers loaned too much money to too many unqualified homebuyers. California was hit especially hard by the inevitable meltdown, suffering the worst recession since the Great Depression.

Given that experience, we should be particularly leery of debt. But California’s state and local governments have amassed an immense amount of debt in recent years. Two cities have already sought bankruptcy protection because of debts they ran up during the go-go days before the housing bubble burst.

The California Public Policy Center, a conservative policy think tank, recently issued a comprehensive report on state and local debt – not only formal bonds, but borrowing from special funds to cover budget deficits, borrowing from the federal government for unemployment benefits and, most important, unfunded liabilities for retiree pensions and health care.

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